A Medical Expense Reimbursement Plan (MERP) is a Section 105 partially self-funded health plan designed for small to medium-sized businesses.
This type of Health Reimbursement Arrangement (HRA) allows employers to cover portions of their employees’ health plan costs, such as deductibles, coinsurance, and copayments on a tax-free basis.
MERPs are a powerful way to provide tailored, cost-effective health benefits while ensuring employees receive support for their out-of-pocket medical expenses. Our implementation team works closely with you to seamlessly integrate our solution with your chosen health insurance carrier.
By switching the purchased insurance plans to a high deductible health plan, employers can save up to 40% on insurance premiums. This reduction in premium creates the financial bandwidth for employers to pay for a portion of the members’ claims. This reduction in premium allows IIS to administer the plan so members have rich, comprehensive benefits.
A MERP is not a section 125 plan, cafeteria plan, or flexible spending account. A MERP is a Section 105 plan, offering flexibility and customization. Employers can pair a MERP with any health insurance carrier and customize employees’ benefit packages.
By leveraging a High Deductible Health Plan (HDHP), employers can adjust deductibles, medical copays, pharmacy copays, and coinsurance levels to suit their needs.
Most members will have minor claims, meaning that the majority of the premium dollars go straight to the carrier. MERP plans help your clients save big with lower premiums while the carrier takes care of large claims.
As a TPA that has collected claims data over 25 years – we found that only 10% of any group will have large claims. 90% of your group will incur less than their deductible and over 30% will incur zero claims whatsoever.
As a business, it’s tough to rationalize spending $700, $800, $900, sometimes $1,000 a month on premiums for your employees to never reach their deductibles. This is where MERP’s allow you to capitalize on your healthy members, but still provide comprehensive benefits for those employees that require lower deductibles.
7%-10% of members will have a large claim that reaches deductible maximum.
60% of members will incur minor claims ranging from $25-$75 (i.e. minor prescriptions, pediatrician visit, etc.).
30% of members will incur zero healthcare costs.
Designed with a member-first approach, our reimbursement process eliminates unnecessary financial burdens. We believe employees shouldn’t have to front the full cost of their medical expenses while waiting to be paid back.
That’s why we pay providers—including doctors, hospitals, facilities, and pharmacies—directly, ensuring our members are only responsible for their designated copay at the time of service.
For our members, using a MERP is very similar to your standard medical insurance. When members arrive at their providers offices, they are only required to pay what their MERP level benefit dictates. This often comes in the form of a low-cost copay. From there – IIS Benefits will work with the employer and the provider directly to issue the reimbursement.
MERP’s and HRA’s are very similar. They employ the same strategy of issuing a reimbursement for qualified medical expenses. However, most HRA’s will reimburse employees who “overpaid” for their services up front. In a MERP, the member pays a lower amount at the time of visit and the reimbursement is issued to the provider later. This format creates more flexibility in funding for the employer and allows the employer to take advantage of tax-deferred, unused, reserves.
A Health Savings Account (HSA) is a different type of medical insurance funding vehicle than a MERP. An HSA places pretax contributions from employers and employers in an account used to pay for qualified medical expenses. HSA funds can be used to pay for medical costs incurred, however, these are not used in a “reimbursement” process. However, a MERP strategy can help implement a more cost-effective HSA model for employers.
If you are an employer wishing to reimburse your employees for some of their qualified medical expenses, it is easiest to do so by establishing a relationship with a medical expense reimbursement plan Third Party Administrator (MERP TPA).
There are different ways that employers can fund their MERP. With IIS Benefits, all claims are funded internally by the client. We recommend that employers set aside a specified dollar amount month over month so that they have cash available to claims that they are responsible for reimbursing. All this funding is done internally by the client in line with a detailed IIS Strategy recommendation. When it comes time for claims to be paid, IIS Benefits invoices employers for the reimbursement amount and then we write and mail the reimbursement check to qualified medical and pharmacy providers.
